Sunny also accuses me of making up a figure of £775,778 for Ken’s total earnings. I live in hope that he will actually look at the accounts at some point. If he does, he will find a line each year saying that “the turnover shown in the profit and loss account represents amounts invoiced during the period,” ie the year. The £775k figure was produced by adding together these “amounts invoiced.”

I never accused him of “making up” anything – I said Gilligan had conveniently left out the £775k figure after our initial piece on Friday morning.

Read carefully what Gilligan said originally and what he’s saying now.

His original piece said: “In three years, however, he has now channelled total earnings of £755,778 through the company, putting him comfortably in the top 1 per cent of all earners.”

That says Ken earned over £775k over three years. In his reply, he now says he got the £775k figure by adding the amounts invoiced. But that does not mean Ken earned that money personally.

Notice the difference?

Anyway, this is what our accountant friend said. Feel free to try and pick holes (I’ve combined several emails and corrected typos).

—————-

Andrew Gilligan’s article is simply bollocks.

a) There is no possible way Gilligan can say that 238k was “funnelled” through Silveta, because this figure is simply the end of FY asset figure, and no indication of income/expenditure. I.e. there could have been a very small income if most of this is made up of fixed assets, or there could be massive income matched by massive expenditure, but this wouldn’t be reflected in the balance sheet.

b) It’s perfectly reasonable to use a firm for this type of operation, rather than simply submit all accounts as a sole trader, just as many thousands of people do, not least because he’s employing people. Where it’s dodgy is where it’s one person essentially working for one organisation in an employment relationship, but pretending to be self-employed, as was the case recently with that geezer from the Student Loans Company, who was being paid through a company for doing a job that should have been subject to PAYE.

c) In particular, if he HAD NOT set up a firm, and simply allowed his “staff” to invoice him for their services, he’d have been effectively assisting THEM to avoid tax because they’d then declare as self-employed (and reduce their tax through declaring expenses) in spite of having only one person who pays them regularly, and are therefore de facto employees in the eyes of HMRC. Although Ken could have still paid them as employees if he’d been a sole trader.

d) Being a company doesn’t necessarily offer more protection to employees, but it is generally good to have a separation between an individual and the activities he/she carries out for business.

Having a company means you have to have some sort of governance – being regulated by the Companies Act and having to declare dividends, rather than taking money out willy nilly. Actually it’s far more transparent and above board than being a sole trader because it’s more tightly regulated.

e) It’s utterly ludicrous for Gilligan to accuse Livingstone of tax avoidance when Ken is i) simply doing this right; ii) there is no evidence that he’s actually paying less tax overall anyway. The simple 50%/20% differentiation offered by Gilligan, and the sums based on a purported income of 228k, take no account of the real expenditure on staffing presumably incurred (with tax then properly paid by the staff).

All we know is that the company made a surplus in the year of £45,932. That could have been on a turnover of £100k or £1m – we don’t know. There’s absolutely no grounds to conclude he’s paying less tax.

—————-

No doubt the usual suspects will close their ears and trot out the usual lines.

But this mud-slinging operation isn’t going anywhere. The Taxpayers Alliance complaint is a dud. They simply want to detract from the real issues.

It’s the old problem that there’s legally no such thing as tax avoidance. You either pay the tax required of you by law, or you don’t. The problem comes when politicians try and impose a moral tax code over and above the legal one – i.e. that there’s a moral duty to pay the maximum tax possible. And since pretty much the loudest expositor of this view over the past few years has been Ken himself, it’s hardly surprising that this issue has come back and bitten him.

Just look at the defences he and Ed have been using – it’s all perfectly legal, everybody does it – they do sound rather like the sort of arguments that Ken has been decrying everyone else for using.

Can’t say I’ve any particular regard for Gilligan as a journalist but it’s a bit hard to get round the fact that if Livingstone hadn’t used a company to reduce his tax exposure we wouldn’t be having a row about exactly how much money he’s been passing through it & the purposes the money’s been used for. And the subject wouldn’t have been such a hot topic if Livingstone hadn’t been so ready to point a finger at others’ tax affairs.
Somewhat redolent of the Guardian’s attacks on companies’ offshore tax arrangements whilst using the Cayman Islands to reduce it’s own exposure.
Good principle: If you live in a glass house, better not to initiate the stone throwing.

Incidentally, on the Gilligan journalistic front, not the best idea to be quoting the “tax avoidance campaigner Richard Murphy” when the latter’s been using exactly the same arrangement to reduce his own taxes.
Oh well, Hypocrisy-R-Us. It’s what “popular left-of-centre politics blog.(s)” do.

I suspect it’s already done its damage. Ken doesn’t have a one sentence explanation that doesn’t like every defence of tax avoidance (it’s legal, everyone does it) and as shown by Sunny’s 434 posts trying to explain/justify/defend/insult-the-messenger the accusation is far shorter and more comprehensible than the rebuttal.

If there really has been impropriety in his use of company staff to serve on political campaigns, it will generate some headlines, but the real damage has been done here. Heh.

Sorry Sunny, this article is a load of bollocks. From another accountant. ie myself:

a) 238k is the end of year Net Asset figure, and is clearly the difference between built up profit and loss over the year. Bringing in ‘fixed assets’ is in this debate pointless, as introduction of fixed assets is always matched by an introduction of a liability. Wether the income/expenditure is big or small is not a factor, It is the change in the year in the Net Asset/Shareholders which is the retained profit for that year.

b) Is a pointless fact, sole traders/companies are individual choice, and it’s the hyprocrisy charge, and the introducton of Ken’s wife as director/(shareholder) here which is important.

c) Another pointless arguement. Sole traders can employ people just as easily as companies. Self-employment of peole working for Ken is a matter of the facts in the contract and conditions, not a choice which Ken could or could not make.

d) Is another pointless fact.

e) ‘Doing this right’ ie= legal, but thats the point of tax avoidance. It’s legal, but is it morally correct. Which is the entire hyprocracy charge against Ken.

Turnover/expenditure is immaterial. Its the PROFIT which people pay the tax on. In this regard which is clear is the figure from the first year of trading which shows profit of at least the first level of net assets. Beyond that the year on year difference is masked by the level of dividend paid.

As my appearance in the comments precipitates anguish over at the Guido Fawkes blog, I might as well join in.

The idea of Gilligan’s attack, the TPA letter to HMRC, and also the Mail accusation of “kickbacks”, is not to prove anything. It’s to kick Livingstone and hobble his campaign. Once the election is over, they’ll all stop – unless Livingstone gets elected, in which case it will move from all-out assault to a steady drip-drip of knocking copy.

And, talking of the Fawkes blog, its proprietor appears to have no room to call out Livingstone for hypocrisy on tax avoidance, as I’ve noted:

A pretty difficult issue for the financially illiterate (like myself) to understand.
But it’s a pure spin issue both ways I’m guessing, and if exactly the same false or over-egged accusations were being made against Boris, I bet that those now defending Ken would be sticking the boot into Boris over them. And totally ignoring any counter points in his defence.

It’s a lot of smoke and mirrors IMO and ignores looking more closely at Ken’s old-time leftie world view (Socialist Action, Lee Jasper, ”Viva Chavez – viva Cuba” nonsense).
And where we even had David Lammy spinning in an open letter about Boris ”not even doing the job full-time” …. because he knocked out a column for the Telegraph once a week.
And faithfully reported here on LC.
It’s dishonest.

I suspect it’s already done its damage. Ken doesn’t have a one sentence explanation that doesn’t like every defence of tax avoidance (it’s legal, everyone does it) and as shown by Sunny’s 434 posts trying to explain/justify/defend/insult-the-messenger the accusation is far shorter and more comprehensible than the rebuttal.

How very Karl Rove of you.

As Tim Fenton points out at 9, here in glorious technicolor is just about as bald an admission that you can get that smear was the only goal in this whole “controversy”.

As the master of this tactic Rove said: “If you’re explaining, you’re losing”.

Truth goes out the window when conservatism and the broader rightwing fringe collide with an election campaign.

And, talking of the Fawkes blog, its proprietor appears to have no room to call out Livingstone for hypocrisy on tax avoidance

Yes he does, unless you can point me to all the posts where Guido has called tax avoidance a terrible thing in itself. It’s not the tax avoidance that Guido is so cheerfully bashing Ken for, it’s the conjunction of the tax avoidance with the decades of rhetoric about how evil tax avoidance is, and how people who do it are bastards who shouldn’t be allowed to vote.

Yes tory vermin love their Karl Rove smears. Roves dad was a Nazi so good to see Tim J the kind of people you like to hang out with.

The Right has to smear because to talk about their pro corporate elite policys does not work. Lie, and smear is the tory way. Funny they never write about all those tory hypocrites that use the NHS while all the time voting to destroy it.

Gilligan has totally failed to hold Boris to account for his time in office so has shown himself to be no journalist.

“tory vermin love their Karl Rove smears. Roves dad was a Nazi” is one of the great unintentionally funny opening lines of 2012 so far. Kudos, “Sally”, kudos.

What’s so depressing about this, Sunny, is that you recycle every tired attack line that’s spun against Boris, but then pooh-pooh any criticism of Ken as “desperate”. The reason people show up here to mock is not that you support Ken – millions do – but more that it’s ultimately just low-grade hackery. If the boot were on the other foot, you’d be kicking Johnson for all you were worth, and no doubt will be tomorrow.

But there’s more. You fulminate against the influence of the Murdoch press while Ken takes money from the Iranian government; you criticise Gilligan as a hack while dismissing the mounting evidence of Johann Hari’s sociopathic behaviour as “stupid allegations” right up till the moment when he confessed and went into purdah. The double standards… that’s the depressing part.

I hear a gnashing of teeth, but it’s not coming from your comments section.

Sunny and Andrew Gilligan are sort of opposite but equals.
Harry Hill should have them on his TV Burp programme to have one of those pantomime fights.

London deserves better than Boris and Ken and this kind of politicing takes the mick out of all of us.
It’s for people who fantasise that they are at the heart of their respective political machines ….. like in that George Clooney film ‘The Ides of March’.

Your “explanation” fails to explain, sounds like someone using jargon to avoid making things clear. You do the usual Tory thing of talking in unsupported assumptions.

@Hobson

The accountant Sunny quotes may well wish to be anonymous because she works for a large company or for clients both of whom are most likely to be Tories, and probably so does Dicker. The difference is therefore that Dicker’s employers/clients are mostly likely to be pleased at him publishing his opinion whereas Sunny’s contact’s accountant is likely to lose business or her job.

Mayor of London is little more than a non-job. Most things there are delivered by central government quangos or by the Borough Councils.

The point is proved by the fact that the only two Mayors have been Ken and Boris, yet London has not burned to the ground or anything like that.

The choice is between Boris for only three years of a four-year term, since the safe seat of Reigate has been arranged for him in 2015, or Ken until he dies, since by 2016 he will be so old that it would ever after seem cruel to remove him.

1) I was never happy about Ken appearing on Press TV. But let’s not forget – Andrew Gilligan ALSO had a show on Press TV that went on for a lot longer, even after we pointed out the broadcaster’s holocaust denial.

2) On Johann Hari – I actually said he was wrong to do what he did from the start – feel free to look it up o Pickled Politics. I just didn’t see it as a world-shattering story like others, who wanted to put in the boot for ideological reasons. Remember, we actually published a long piece critical of Hari here too.

I mean, really, if you are going to accuse me of hypocrisy at least get your facts right?
This is why I can’t take right-wingers seriously – they invent their facts to suit a story whereby everyone else is wrong and hypocritcal and they’re in the clear.

But Mr. E really isn’t wrong when it comes to his general point is he? You paint yourself as above partisan attacks, as a voice of truth and goodness – yet when it comes down to it you are just as dirty and hypocritical as the people you attack, if not more so.

Your attacks on Gilligan really don’t amount to a great deal more than simple slurs and very weak accusations that he has got things wrong. Accusations he has defended himself against quite fully on his own blog.

You also miss the point totally about the nature of these attacks on Ken. Whilst Gilligan clearly hates Ken, it does not absolve Ken of the charges of hypocrisy and the possible illegal funding of his political activities.

Ken by his own admission has (legally) used tax avoidance measures. Which would be fine had he not spent so much time attacking others for doing the same. Now it seems like he’s also managed to fail to declare money spent via his company (through employing aides) on his political campaign. Which has been going since 2010. So accounts are available.

You might not like GIlligan, but anyone could have written these articles and the charges against Ken would still have been just as valid. yet because it is Gilligan, and an attack on your team, somehow the article is “shoddy journalism”. When I compare his articles and yours though, I would have to say the poor quality, unresearched work tends to reside mostly on this site.

“1) I was never happy about Ken appearing on Press TV. But let’s not forget – Andrew Gilligan ALSO had a show on Press TV that went on for a lot longer, even after we pointed out the broadcaster’s holocaust denial.”

Simple question. Do you think it is not hypocritical that Mr Livingstone jumped on the popular ‘tax avoidance is bad’ bandwagon (I doubt this is a long-held principle on his part, so much as an attempt to tackle anger) whilst he himself was undertaking tax avoidance? If so, your position is at least constant – and could be justified as saying attacking tax avoidance is a great political tool to attract votes but should not be taken seriously.

In point (a), “There is no possible way Gilligan can say that 238k was “funnelled” through Silveta”

Well yes, that is exactly what Gilligan can say. If the company has £238k in net assets at the year end, then it must have received earnings of at least £238k up to that point. And that assumes that he did not incur expenses. Which of course he did. So the actual earnings figure is likely to be substantially higher.

And God knows what fixed assets have got to do with the level of retained profits that has been built up. The two are completely unconnected.

She also shows a worrying lack of commerciality for an accountant by suggesting there may be substantial fixed assets representing that £238k figure of net assets. What – in a one-man band providing speeches etc? OK, he might have a computer and laptop worth say £3k, but this clearly isn’t a guy with heavy industry plant and machinery totalling say £150k.

By talking of “massive income matched by massive expenditure” she is casting further doubts on her credibility. In my experience these one man band companies for speeches etc have massive income and very little expenditure. It is difficult to imagine what kind of “massive expenditure” he could be incurring.

In point (b), the idea that is reasonable to set up a company BECAUSE you’re employing people is absurd. Many lawyers, accountants are sole traders or partnerships who employ their staff. You do not have to be a company to employ someone. She also missed the opportunity in this point to explain that a company offers him the chance to pay tax at 21% rather than at 50%. The reference to the geezer from the SLC is a red herring – totally irrelevant.

Point (c) starts off with the ludicruous implication that a sole trader cannot have any employees, which is finally corrected in the last sentence (hopefully after everyone has forgotten about the absurdity of the opening sentence – but in which case, what was the point of making point (c)?) Point (c) is thus perhaps the most stupid point of all.

Point (d) ignores the commercial reality that in a one-man band company the director (Ken) can basically take as much out as he wants, just like a sole trade business. OK he has to declare dividends and minute it, poor guy (he does that himself!), big deal.

Point (e) – it is demonstrable that he’s paying less tax than he would have but for the company – even Ken has admitted it’s saved him £50,000.

So, Natacha (21) if this girl does work for a large accountancy firm it’s no wonder she wants to remain anonymous lest her employers finds out she is so ignorant.

“That says Ken earned over £775k over three years. In his reply, he now says he got the £775k figure by adding the amounts invoiced. But that does not mean Ken earned that money personally.”

Well of course not: legally, that money was earned by the company, not by Ken. But I think it was fairly obvious that Gilligan was saying that Ken COULD have earned that money had he not set up the company personally, and one of the reasons Ken did set up the company was to save tax.

[…] little more than tabloid tittle-tattle. This paragraph is revealing because he manages to drag in Liberal Conspiracy’s Sunny Hundal who wrote, Read carefully what Gilligan said originally and what he’s saying […]